Draghi gets EU top court’s backing for 2012 bond-buying plan
The European Central Bank’s 2012 bond-buying program won the backing of the European Union’s highest court, expanding Mario Draghi’s crisis-fighting arsenal.
The EU Court of Justice, in a ruling in Luxembourg on Tuesday, said the Outright Monetary Transactions program doesn’t exceed the powers of the ECB in relation to monetary policy. The tribunal said there are some conditions on the plan, which have been met.
The court has been examining the OMT program since Germany’s own top court last year sought guidance on the case. The German judges expressed concerns that the yet untapped tool, announced by ECB President Draghi three years ago, may have gone beyond the central bank’s mandate and might be a form of monetary financing of governments, which EU treaties ban.
The OMT program “does not exceed the powers of the ECB in relation to monetary policy and does not contravene the prohibition of monetary financing of” EU nations, the Luxembourg court said in a press release Tuesday.
The ECB announced details of the OMT plan in September 2012 as bets multiplied that the euro area would break apart and after Draghi’s promise to do “whatever it takes” to save the currency. The calming of financial markets that the still-untapped OMT program produced helped the euro area emerge from its longest-ever recession.
Less than three years later, Greece is again edging toward an exit from the single currency as talks with creditors fail to unlock bailout funds.
This time around, the ECB is in the midst of a separate bond-purchase plan that it started after a deflationary scare, and which has already become the subject of a complaint in Germany.
[Bloomberg]
